CF Industries Holdings, Inc 10-Q for FY2020 Q1

CF Industries Holdings, Inc. (CF)

10-Q 2020-05-07 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

CF Industries Holdings, Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $971M; down 3.0% from $1B a year earlier
Net income: $91M; down 22.9% from net income of $118M a year earlier
Diluted EPS: $0.31; down 22.5% from $0.40 a year earlier

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OR
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to



Delaware		20-2697511
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4 Parkway North, Suite 400		60015
Deerfield,	Illinois	(Zip Code)
(Address of principal executive offices)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
common stock, par value $0.01 per share	CF	New York Stock Exchange



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐



PART I.	Financial Information
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	1
		Consolidated Statements of Comprehensive (Loss) Income	2
		Consolidated Balance Sheets	3
		Consolidated Statements of Equity	4
		Consolidated Statements of Cash Flows	5
		Notes to Unaudited Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4.	Controls and Procedures	41
PART II.	Other Information
	Item 1.	Legal Proceedings	41
	Item 1A.	Risk Factors	42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 6.	Exhibits	43



(Mark One)
☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three months ended March 31,
	2020			2019
	(in millions, except per share amounts)
Net sales	$	971		$	1,001
Cost of sales	767			781
Gross margin	204			220
Selling, general and administrative expenses	54			58
Other operating—net	6			4
Total other operating costs and expenses	60			62
Equity in earnings of operating affiliate	3			7
Operating earnings	147			165
Interest expense	44			60
Interest income	(1		)	(4		)
Other non-operating—net	—			(1		)
Earnings before income taxes	104			110
Income tax provision (benefit)	13			(8		)
Net earnings	91			118
Less: Net earnings attributable to noncontrolling interest	23			28
Net earnings attributable to common stockholders	$	68		$	90
Net earnings per share attributable to common stockholders:
Basic	$	0.31		$	0.40
Diluted	$	0.31		$	0.40
Weighted-average common shares outstanding:
Basic	216.0			223.4
Diluted	216.6			224.6
Dividends declared per common share	$	0.30		$	0.30



	(Unaudited)
	March 31, 2020			December 31, 2019
	(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	753		$	287
Accounts receivable—net	251			242
Inventories	379			351
Prepaid income taxes	78			71
Other current assets	19			23
Total current assets	1,480			974
Property, plant and equipment—net	7,938			8,170
Investment in affiliate	91			88
Goodwill	2,346			2,365
Operating lease right-of-use assets	287			280
Other assets	299			295
Total assets	$	12,441		$	12,172
Liabilities and Equity
Current liabilities:
Short-term debt	$	500		$	—
Accounts payable and accrued expenses	378			437
Income taxes payable	19			1
Customer advances	239			119
Current operating lease liabilities	94			90
Other current liabilities	5			18
Total current liabilities	1,235			665
Long-term debt	3,958			3,957
Deferred income taxes	1,217			1,246
Operating lease liabilities	197			193
Other liabilities	431			474
Equity:
Stockholders’ equity:
Preferred stock—$0.01 par value, 50,000,000 shares authorized	—			—
Common stock—$0.01 par value, 500,000,000 shares authorized, 2020—216,610,856 shares issued and 2019—216,023,826 shares issued	2			2
Paid-in capital	1,313			1,303
Retained earnings	1,961			1,958
Treasury stock—at cost, 2020—2,813,869 shares and 2019—0 shares	(108		)	—
Accumulated other comprehensive loss	(440		)	(366		)
Total stockholders’ equity	2,728			2,897
Noncontrolling interest	2,675			2,740
Total equity	5,403			5,637
Total liabilities and equity	$	12,441		$	12,172



	Common Stockholders
	$0.01 Par Value Common Stock		Treasury Stock			Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
	(in millions, except per share amounts)
Balance as of December 31, 2019	$	2	$	—		$	1,303	$	1,958		$	(366	)	$	2,897		$	2,740		$	5,637
Net earnings	—		—			—		68			—			68			23			91
Other comprehensive loss	—		—			—		—			(74		)	(74		)	—			(74		)
Purchases of treasury stock	—		(100		)	—		—			—			(100		)	—			(100		)
Acquisition of treasury stock under employee stock plans	—		(8		)	—		—			—			(8		)	—			(8		)
Issuance of $0.01 par value common stock under employee stock plans	—		—			3		—			—			3			—			3
Stock-based compensation expense	—		—			7		—			—			7			—			7
Cash dividends ($0.30 per share)	—		—			—		(65		)	—			(65		)	—			(65		)
Distribution declared to noncontrolling interest	—		—			—		—			—			—			(88		)	(88		)
Balance as of March 31, 2020	$	2	$	(108	)	$	1,313	$	1,961		$	(440	)	$	2,728		$	2,675		$	5,403



Balance as of December 31, 2018	$	2	$	(504	)	$	1,368		$	2,463		$	(371	)	$	2,958		$	2,773		$	5,731
Net earnings	—		—			—			90			—			90			28			118
Other comprehensive income	—		—			—			—			30			30			—			30
Purchases of treasury stock	—		(60		)	—			—			—			(60		)	—			(60		)
Retirement of treasury stock	—		504			(65		)	(439		)	—			—			—			—
Acquisition of treasury stock under employee stock plans	—		(4		)	—			—			—			(4		)	—			(4		)
Issuance of $0.01 par value common stock under employee stock plans	—		—			2			—			—			2			—			2
Stock-based compensation expense	—		—			6			—			—			6			—			6
Cash dividends ($0.30 per share)	—		—			—			(67		)	—			(67		)	—			(67		)
Distribution declared to noncontrolling interest	—		—			—			—			—			—			(86		)	(86		)
Balance as of March 31, 2019	$	2	$	(64	)	$	1,311		$	2,047		$	(341	)	$	2,955		$	2,715		$	5,670



	Ammonia		Granular Urea		UAN		AN		Other		Total
	(in millions)
Three months ended March 31, 2020
North America	$	154	$	331	$	230	$	46	$	59	$	820
Europe and other	39		6		5		70		31		151
Total revenue	$	193	$	337	$	235	$	116	$	90	$	971
Three months ended March 31, 2019
North America	$	160	$	335	$	242	$	46	$	59	$	842
Europe and other	27		8		14		81		29		159
Total revenue	$	187	$	343	$	256	$	127	$	88	$	1,001


⁽¹⁾	As of March 31, 2020 and December 31, 2019, we had property, plant and equipment that was accrued but unpaid of approximately $36 million and $42 million, respectively. As of March 31, 2019 and December 31, 2018, we had property, plant and equipment that was accrued but unpaid of $26 million and $48 million, respectively.



	Ammonia			Granular Urea			UAN		AN			Other			Total
	(in millions)
Balance as of December 31, 2019	$	587		$	828		$	576	$	302		$	72		$	2,365
Effect of exchange rate changes	(2		)	(1		)	—		(14		)	(2		)	(19		)
Balance as of March 31, 2020	$	585		$	827		$	576	$	288		$	70		$	2,346



	March 31, 2020							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
	(in millions)
Customer relationships	$	125	$	(46	)	$	79	$	131	$	(45	)	$	86
Trade names	30		(7		)	23		31		(7		)	24
Total intangible assets	$	155	$	(53	)	$	102	$	162	$	(52	)	$	110



	Estimated Amortization Expense
	(in millions)
Remainder of 2020	$	6
2021	8
2022	8
2023	8
2024	8
2025	8



FORM	10-Q



	Three months ended March 31,
	2020			2019
	(in millions)
Net capitalized turnaround costs:
Beginning balance	$	246		$	252
Additions	7			9
Depreciation	(25		)	(30		)
Effect of exchange rate changes	(5		)	2
Ending balance	$	223		$	233



	March 31, 2020
	Total Fair Value			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Cash equivalents	$	700		$	700	$	—		$	—
Nonqualified employee benefit trusts	18			18		—			—
Embedded derivative liability	(19		)	—		(19		)	—



	December 31, 2019
	Total Fair Value			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Cash equivalents	$	228		$	228	$	—		$	—
Nonqualified employee benefit trusts	19			19		—			—
Derivative liabilities	(12		)	—		(12		)	—
Embedded derivative liability	(20		)	—		(20		)	—



	March 31, 2020
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Cash	$	53	$	—	$	—	$	53
Cash equivalents:
U.S. and Canadian government obligations	680		—		—		680
Other debt securities	20		—		—		20
Total cash and cash equivalents	$	753	$	—	$	—	$	753
Nonqualified employee benefit trusts	16		2		—		18



	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Long-term debt	$	3,958	$	3,970	$	3,957	$	4,295


⁽¹⁾	See Note 12—Financing Agreements for additional information.


⁽²⁾	Interest on tax liabilities for the three months ended March 31, 2020 consists of a reduction in interest accrued on the reserve for unrecognized tax benefits.



	Effective Interest Rate	March 31, 2020				December 31, 2019
	Effective Interest Rate	Principal		Carrying Amount ⁽¹⁾		Principal		Carrying Amount ⁽¹⁾
		(in millions)
Public Senior Notes:
3.450% due June 2023	3.562%	750		748		750		747
5.150% due March 2034	5.279%	750		740		750		740
4.950% due June 2043	5.031%	750		742		750		742
5.375% due March 2044	5.465%	750		741		750		741
Senior Secured Notes:
3.400% due December 2021	3.782%	250		248		250		248
4.500% due December 2026	4.759%	750		739		750		739
Total long-term debt		$	4,000	$	3,958	$	4,000	$	3,957


⁽¹⁾	Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $10 million as of both March 31, 2020 and December 31, 2019, and total deferred debt issuance costs were $32 million and $33 million as of March 31, 2020 and December 31, 2019, respectively.



	Shares	Amounts
	(in millions)
Shares repurchased in 2019:
First quarter	1.5	$	60
Second quarter	2.7	118
Third quarter	1.5	72
Fourth quarter	1.9	87
Shares repurchased in 2019	7.6	337
Shares repurchased in 2020:
First quarter	2.6	100
Shares repurchased as of March 31, 2020	10.2	$	437



	Foreign Currency Translation Adjustment			Unrealized Gain on Derivatives		Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
	(in millions)
Balance as of December 31, 2018	$	(250	)	$	5	$	(126	)	$	(371	)
Effect of exchange rate changes and deferred taxes	32			—		(2		)	30
Balance as of March 31, 2019	$	(218	)	$	5	$	(128	)	$	(341	)

Balance as of December 31, 2019	$	(188	)	$	5	$	(183	)	$	(366	)
Reclassification to earnings⁽¹⁾	—			—		1			1
Effect of exchange rate changes and deferred taxes	(83		)	—		8			(75		)
Balance as of March 31, 2020	$	(271	)	$	5	$	(174	)	$	(440	)


⁽¹⁾	Reclassifications out of accumulated other comprehensive income (loss) to earnings during the three months ended March 31, 2020 and 2019 were not material.



	Ammonia		Granular Urea⁽¹⁾		UAN⁽¹⁾		AN⁽¹⁾		Other⁽¹⁾		Consolidated
	(in millions)
Three months ended March 31, 2020
Net sales	$	193	$	337	$	235	$	116	$	90	$	971
Cost of sales	173		224		193		103		74		767
Gross margin	$	20	$	113	$	42	$	13	$	16	204
Total other operating costs and expenses											60
Equity in earnings of operating affiliate											3
Operating earnings											$	147

Three months ended March 31, 2019
Net sales	$	187	$	343	$	256	$	127	$	88	$	1,001
Cost of sales	166		228		195		114		78		781
Gross margin	$	21	$	115	$	61	$	13	$	10	220
Total other operating costs and expenses											62
Equity in earnings of operating affiliate											7
Operating earnings											$	165


⁽¹⁾	The cost of the products that are upgraded into other products is transferred at cost into the upgraded product results.


•	two Canadian nitrogen manufacturing facilities located in Medicine Hat, Alberta (the largest nitrogen complex in Canada) and Courtright, Ontario;


•	two United Kingdom nitrogen manufacturing facilities located in Billingham and Ince;


•	an extensive system of terminals and associated transportation equipment located primarily in the Midwestern United States; and


•	a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in the Republic of Trinidad and Tobago that we account for under the equity method.



	Three Months Ended March 31,
	2020						2019
	Pre-Tax			After-Tax			Pre-Tax		After-Tax
	(in millions)
Unrealized net mark-to-market (gain) loss on natural gas derivatives⁽¹⁾	$	(12	)	$	(9	)	$	2	$	1
Loss on foreign currency transactions, including intercompany loans⁽²⁾	18			14			2		1
Insurance proceeds⁽²⁾	(10		)	(8		)	—		—
Louisiana incentive tax credit⁽³⁾	—			—			—		(30		)


⁽¹⁾	Included in cost of sales in our consolidated statements of operations.


⁽²⁾	Included in other operating—net in our consolidated statements of operations.


⁽³⁾	Included in income tax provision (benefit) in our consolidated statement of operations.


⁽¹⁾	Includes the cost of natural gas and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method.